July 15, 2013 - In a letter to leaders of
congressional tax writing committees, American
Association of Airport Executives (AAAE)
President Todd Hauptli today called on lawmakers
to close the current tax loophole that allows
U.S. air carriers to avoid paying federal excise
taxes on the billions of dollars in annual
revenues collected on baggage fees and other
ancillary charges and to permanently eliminate
the Alternative Minimum Tax (AMT) penalty on
airport-issued private activity bonds.

"In addition to frustrating passengers, the
imposition of baggage fees and other ancillary
charges as 'add-ons' to the final price paid for
a ticket creates confusion for consumers and
effectively robs the Airport and Airway Trust
Fund of hundreds of millions of dollars in
annual revenue, funds that would otherwise be
available for critical airport and aviation
system upgrades," Hauptli wrote.

"The diversion of funding from the aviation
trust fund through the ancillary fee loophole
adds to the already daunting challenges facing
the nation's airports as they struggle to fund
more than $10 billion in annual needs."

Hauptli noted that taxing baggage fees at the
7.5 percent rate paid on airline tickets would
have generated more than $260 million in 2012,
and taxing all ancillary fees would have
produced hundreds of millions of dollars more.
With air carriers are aggressively shifting the
airline pricing model away from utilizing ticket
prices to generate revenue to a greater reliance
on ancillary fees, the amount of revenues lost
because of the existing tax loophole will likely
grow in the future.

According to data released by the Department of
Transportation in late June, U.S. passenger
airlines collected a total of $800 million in
baggage fees in the first quarter of 2013.
Airlines collected almost $3.5 billion from
baggage fees in 2012 more than the amount
Congress approved for federal grants to all
airports through the Airport Improvement Program
in FY 2013.

Additionally, information about these
substantial fees is not fully disclosed through
all ticket distribution channels used by
consumers, which makes it difficult for
travelers to compare the total costs of flights
from different carriers. Concern about this
practice has been highlighted by the Government
Accountability Office and is now the subject of
a DOT rulemaking expected to be completed later
this month. The fact that the carriers will not
fully disclose voluntarily all of the fees they
impose to travelers searching for fares is
troubling.

Finally, to help airports invest additional funds in
necessary infrastructure development and support
high-paying jobs for workers across the country, AAAE
also advocated for the permanent elimination of the AMT
penalty on airport-issued private activity bonds. To
view the full AAAE letter, click here.